Arrest yesterday of 10 former and current executives represents a fall from grace for the TV manufacturer The scandal surrounding Skyworth Digital Holdings and the arrest of chairman Stephen Wong Wang-sang and nine other former and current executives, represents a fall from grace for an upstart Hong Kong television exporter that became China's third-largest television manufacturer in just 15 years. An initial public offering darling that rose 37.68 per cent on its Hong Kong stock exchange debut in April 2000, Skyworth's rise to success paralleled the rapid development of the mainland economy. Deftly negotiating its way up in a manufacturing sector dominated by state-owned enterprises, the company linked its fortunes to the aspirations of the Chinese emerging middle classes. The company is one of a posse of Chinese electronics firms, including rival TCL, ambitious enough to market products bearing its own brand name overseas. Founded as the Skyworth Group in Hong Kong in 1988 to export OEM [original equipment manufacturing] televisions, the company's website claims turnover from sales increased at least 30 per cent per year in the decade before listing. After a well-received IPO that was nearly eight times oversubscribed, Skyworth shares leapt 78 cents to $2.85 on their debut. The share price was $2.725 when trading was suspended yesterday. Skyworth posted a net profit of $318.3 million in the 12 months prior to listing but the company reported a net loss of $125.68 million only six months later as revenue was savaged by a price war among television manufacturers on the mainland. However, Skyworth's financials had since rebounded to pre-IPO levels as the mainland television market recovered and the company focused on producing more own-branded products for export. The company announced net profits of $341.9 million for the 12 months to March this year and forecast a 13 per cent rise in television unit sales to seven million in the current financial year. Skyworth earmarked 300 million yuan for a new factory in Shenzhen that will produce mainly high-end digital televisions and expects own-branded exports to equal OEM exports by 2013. The company is also believed to be in talks over the purchase of Beijing municipal government-founded television maker Beijing Peony Electronics Group. Skyworth reaffirmed its confidence in the mainland digital television market at its interim results announcement in October, when revenue from digital sets increased to 41 per cent of total television-set revenue from 30 per cent in February, a step closer to the company's target of 70 per cent by 2008. This improvement came despite the fact that the mainland's 201,000 digital television subscribers last year fell far short in number of the government's goal of one million. The company expects to sell 60,000 liquid-crystal display televisions and plasma display televisions in the current financial year, up 340 per cent from the previous year. However, Skyworth's rapid rise has not been without its share of scandal, including a court case filed by United States-based audio technology company Digital Theatre Systems alleging infringement of proprietary digital sound decoding technology. The company also had a run-in with Hong Kong's Inland Revenue Department over accounting irregularities relating to service fee income of $1.12 billion derived from subsidiary Shenzhen Chuangwei-RGB Electronics between April 1994 and October 1999. The tax dispute was listed as a risk factor in the company's listing prospectus and Skyworth eventually settled with a $64.25 million payment - far short of the $173.21 million initially demanded by the authorities. Now it appears that Skyworth's financial irregularities may have run far deeper, with the arrest yesterday by the Independent Commission Against Corruption of 10 current and former company executives for allegedly falsifying accounting records to assist the listing of the company on the Hong Kong stock exchange.